The Chinese want to join the shale gas revolution, even if it means drilling for oil in China’s earthquake hot bed in the Sichuan region, where nearly 70,000 died in an earthquake in 2008.

Royal Dutch Shell Plc and China National Petroleum have started
'fracking' operations in the province.

China hopes to boost annual shale gas production to 6.5 billion
cubic meters by 2015, and reserves are estimated at about 1,115 trillion cubic feet,
according to the US Energy Information Administration, higher
than the estimated 665 trillion gas reserves on American soil.

Europe's largest oil company plans to invest $1 billion per year
in China’s shale gas industry, as part of its goal to increase
global output to four million barrels of oil and gas by
2017-2018, up from current levels of 3.3 million.

Drilling for oil in the Longmenshan mountain range, where India
and Asia meet, could increase tremors in the already highly-sensitive area.

The hydraulic fracturing, or 'fracking' process of extracting oil
from the earth is invasive and is believed by many to be a direct
earthquake instigator.

Extraction by 'fracking' involves pumping millions of gallons of
water and chemicals into the ground, which creates excess hydro
waste, which over time, causes tectonic stress.

“We do detailed structural analysis as a routine part of our
pre-drill evaluation,” Shi Jiangtao, a Shell spokesman in
Beijing, said in an e-mail to Bloomberg. “This means that we
evaluate the geology by using seismic, surface geology, nearby
well data, etc.”

There is strong correlative evidence between deep underground
wells and nearby earthquakes, both in the US and China.

An investigation by the US Geological Survey found that
'fracking' and quakes aren’t directly related, but noted, “at
some locations the increase in seismicity coincides with the
injection of wastewater in deep disposal wells.”

Human-induced earthquakes would be controversial in a region
which experienced one of the deadliest earthquakes in China’s
history, which killed nearly 70,000, including 5,335 school
children in a 2008 quake in Wenchuan, Sichuan region.

The boom in oil and gas 'fracking' has led to jobs, billions in
royalties and profits, and even some environmental gains.

The shale industry boom in the US may add as much as $690 billion
to GDP and create 1.7 million jobs by 2020, according to a study
by McKinsey and Co. The oil boom has boosted domestic employment,
company profits, and GDP in the US, and China is eager to follow
suit, even it means drilling in earthquake territory.

Royal Dutch Shell Plc, China National Petroleum, and China
Petrochemical Corp all currently have drilling operations in the
region.

Environmental concerns

Geologists also raise concerns over the amount of water used in
'fracking', and whether China’s shale ambitions could run the
water supply dry.

China, home to roughly 20 percent of the world’s population, only
controls 6 percent of the world’s fresh water supply, and often
experiences serious water shortages. Adding 'fracking' to this
equation could only further exacerbate the problem. Toxic
chemicals used in fracking alter the drinking water.

Shale gas is often found ‘in the middle of nowhere’, places that
are already prone to water shortages.

Environmentalists in China have also voiced concern over
contamination and pollution brought on by 'fracking' waste
disposal.

Shell's earnings hit hard by shale gas

Royal Dutch Shell’s earnings fell $1.1 billion in Q2, year on
year, blaming poor performance on higher operating costs,
disruptions in Nigeria, and a weakening Aussie currency. Total
revenue fell by 5.6 percent.

Net income fell by 57 percent in the second quarter, which was
partly due to $2.2 billion the company had to write off on shale
exploration and development in the United States.